U.S. Stocks Rebound as Treasuries Climb, Commodities Slip

April 15 (Bloomberg) -- U.S. stocks climbed for a second
day as optimism grew over corporate earnings and the Nasdaq
Composite Index rebounded after falling near its average level
for the past 200 days. Treasuries rose amid increasing tensions
in Ukraine, while emerging markets slumped on signs China’s
economy is slowing.

The Nasdaq Composite rose 0.3 percent at 4 p.m., erasing a
1.9 percent drop earlier. The Standard & Poor’s 500 Index rose
0.7 percent as Coca-Cola Co. and Johnson & Johnson rallied on
earnings reports. The yield on 30-year Treasuries slipped three
basis points to 3.46 percent, touching the lowest level in nine
months. The MSCI Emerging Markets Index tumbled 1.2 percent, the
most in a month. Gold dropped 2 percent. Japan’s currency erased
gains versus the dollar after Nikkei said the government will
downgrade its economic assessment in a report this week.

Ukraine unleashed an offensive to dislodge militants from
towns in its eastern Donetsk region as Russia’s prime minister
said the country risks civil war. China’s money supply grew less
than forecast and the broadest measure of credit fell 19 percent
from a year earlier in March before data that’s expected to show
economic growth slowed in the first quarter.

“Stocks are having meaningful moves in both directions
because people are nervous on both sides,” Michael James, a Los
Angeles-based managing director of equity trading at Wedbush
Securities Inc., said in a phone interview. “Subjectivity plays
such a pivotal role, and emotions, in what’s been going on in
this market that it’s hard to pinpoint what causes a turn in the
direction.”

Moving Average

The Nasdaq Composite fell to within four points of its 200-day moving average of 3,942.50 today before reversing. The last
time the gauge dropped below that level, considered an important
threshold by technical analysts, was Dec. 31, 2012. That’s the
fourth-longest streak in the gauge’s 43-year history, according
to Bespoke Investment Group LLC. The Nasdaq, along with other
benchmark indexes, fell through 10-day through 100-day averages
last week.

The S&P 500 has dropped 2.5 percent from its April 2 record
and posted its worst weekly loss since 2012 as selling from
Internet and biotechnology stocks, the best performers in a
five-year rally, spread to the broader market. The Nasdaq
Composite of technology shares sank 3.1 percent last week, and
is down 7.4 percent from its March peak.

Higher Valuations

While equity returns will slow in coming years because of
relatively higher valuations, the selloff in technology stocks
will likely be contained, according to Cliff Asness, founder and
chief investment officer at AQR Capital Management.

“There’s a difference between an expensive market and a
bubble,” Asness said in an interview on Bloomberg Television’s
“Market Makers.” “When you say something is going to return
less than it used to, that doesn’t mean it’s going to crash. So
I think we are poised for lower returns over the next 10 to 20
years from here.”

The S&P 500 trades at 17 times its members’ reported
earnings. While that’s near its highest valuation in four years,
it’s close to its weekly average since 1937, data compiled by
Bloomberg show.

Manufacturing in the New York region grew at a slower pace
in April, a report from the Federal Reserve Bank of New York
showed. The index dropped to 1.29 from 5.61 in March. Economists
surveyed by Bloomberg predicted it would increase to 8. Positive
readings signal expansion in New York, northern New Jersey and
southern Connecticut.

Earnings Season

Separate data showed the cost of living in the U.S. rose
more than projected in March as food and rents became more
expensive, helping ease Fed concerns that inflation is too low.

Coca-Cola gained 3.7 percent as global volume sales
increased. Johnson & Johnson climbed 2.1 percent to a record as
the company raised its forecast for the year.

Alibaba Group Holding Ltd., China’s largest e-commerce
company that is 24 percent owned by Yahoo, posted its fifth
straight quarterly profit gain on surging sales ahead of a
potential U.S. initial public offering.

Sorting Issues

Profit at S&P 500 companies probably fell 0.9 percent in
the first quarter, analysts predict. At the beginning of the
year, they had projected a 6.6 percent increase. Sales increased
2.6 percent in the first quarter, the estimates show.

“You’re in the process right now, in the short run, of
sorting through earnings, as well as geopolitical and economic
issues,” Chad Morganlander, a Florham Park, New Jersey-based
portfolio manager for Stifel Nicolaus & Co., which oversees more
than $150 billion, said in a phone interview. “There’s a
tremendous amount of volatility and uncertainty because of
concerns over Russia and Ukraine. That’s going to shift the
winds of the market on a minute-by-minute basis.”

The Chicago Board Options Exchange Volatility Index, a
gauge for U.S. stock volatility known as the VIX, dropped 3.1
percent to 15.61 today. The gauge is up 14 percent this year.

Ukraine Crisis

Emerging-market stocks fell for a third day. Ukrainian
units backed by armored personnel carriers blocked all
approaches to the town of Slovyansk, Russia’s state-run RIA
Novosti news service reported, citing an unidentified pro-Russian activist. Two militants were wounded when an airport in
Kramatorsk was stormed, forcing the protesters to retreat,
according to RIA.

The government in Kiev started the operation after fighting
between its forces and pro-Russian separatists turned deadly
this week. The U.S. and the European Union also deliberated
deepening sanctions against Russia, which they blame for stoking
the unrest, as Barack Obama and Russian President Vladimir Putin
remained at odds over who was at fault.

Russia’s Micex Index slid 2.5 percent, while the ruble
slipped 0.8 percent against the dollar to a three-week low. The
Finance Ministry canceled its second ruble bond auction in a
row, citing current market conditions.

European Stocks

Policy makers in Kiev said the rate increase, which is
their first in six years and the biggest since Russia’s debt
default in 1998, is aimed at stemming currency declines that
threaten to boost inflation and disrupt money markets.

The Stoxx 600 fluctuated during the day, slumping during
the final hours to finish 1 percent lower amid developments in
Ukraine. The gauge rose 0.3 percent yesterday, after tumbling
3.1 percent last week.

China’s Economy

Aggregate financing was 2.07 trillion yuan ($333 billion)
in March, the People’s Bank of China said in Beijing today, down
from 2.55 trillion yuan a year ago. M2, China’s broadest gauge
of money supply, rose 12.1 percent from a year earlier, compared
with the 13 percent median estimate of analysts in a Bloomberg
News survey and 13.3 percent in February.

China’s gross domestic product grew 1.5 percent from the
previous three months, according to the median estimate in a
Bloomberg News survey ahead of data released tomorrow, down from
1.8 percent in the fourth quarter. That indicates a sharper
deceleration than the median projection for 7.3 percent growth
from a year earlier, down from 7.7 percent.

“You have this huge uncertainty from the geopolitical
front and China, which is pulling the market in a negative
direction,” Witold Bahrke, who helps oversee $55 billion as a
senior strategist at PFA Asset Management in Copenhagen, said in
a phone interview. “Sentiment is still tilted to the negative
direction after the escalation in Ukraine at the weekend.”

Metals Slump

Copper dropped 1.9 percent to $6,541 a metric ton. China is
the biggest buyer of the metal. Nickel declined 0.7 percent,
falling for the first time in 12 days. Palladium retreated 1.8
percent, following a 5.7 percent gain in five days.

Gold declined 2 percent to $1,300.30 an ounce, the biggest
drop in 16 weeks, on concern that a pickup in U.S. consumer
prices will give the Fed leeway to further scale back stimulus.

The yen rose against most currencies as investor demand for
safety increased. It erased gains versus the dollar after Nikkei
said the government will downgrade its economic assessment in a
report this week. The yen has rallied 2.6 percent this year in a
basket of 10 developed-nation currencies tracked by Bloomberg
Correlation-Weighted Indexes.

Australia’s currency declined 0.8 percent to 93.52 U.S.
cents after appreciating to 94.61 cents on April 10, the highest
level since Nov. 8. Minutes of the Reserve Bank’s latest meeting
showed policy makers reiterated interest rates will stay on
hold.

Italy’s 10-year yield fell seven basis points to 3.11
percent, reaching the lowest level since Bloomberg started
collecting the data in 1993. Local buyers bid for more than 6.72
billion euros ($9.3 billion) of an Italian six-year, index-linked bond yesterday. The rate on similar-maturity Spanish
securities fell five basis points to 3.09 percent.